The following is an archived collection of our weekly insights through the fifth month of 2023. Those who had signed up to our Interlog Insights newsletter received each week’s update to their inbox on the original release date. If you like what you see below, please feel free to sign up yourself to get these updates right as they come!
This month's insights
Week 3 - Originally released May 19
Insight: Carriers Choked Contracts When They Head the Power - What Will Shippers Do Now That They Have It?
Shippers got burnt over the last two years. Some escaped with only minor heat rashes while others were scarred with third-degree burns.
No matter the extent of how disrupted their supply chains became, there’s no denying there weren’t at least several blunders along the way in each and every one of them.
And, while some of these were on shippers for not being prepared for a volatile Covid-era market, the shipping lines (carriers) could’ve made things a little easier for them.
A balance of power
A lot of our talk as of late has been about the shift of power between the shipper and the carrier. What do we mean by this? Who had the power before?
Since the closing months of last year, shippers have been in control of this power dynamic. We’ve seen carriers try to win back some of this leverage through common tactics, like blank sailings or reallocating vessels to other trades, but ultimately shippers have been running the show.
Clearly, it wasn’t always like this. In fact, at one-point last year, frustrated shippers probably thought things would never fall in their favor again.
Market conditions were completely mirrored. Carriers were calling the shots, demand was insatiable, rates were unfathomably high, and finding space was like trying to fit an eight-foot pool table in a studio apartment.
These conditions were unprecedented. And, while that alone is enough to drive chaos in the market, these conditions also slammed the market swiftly.
Volatility came quickly. No one, and to be fair, including carriers, had the foresight to see the invisible.
Last year’s contract chokeholds coming back to bite
However, it’s not the circumstance we look back on. It’s how everyone that was involved reacted to the circumstances.
Carriers saw this as a lucrative opportunity. There’s no shame in that revelation, but at what point did they cross the line?
Well, the answer depends on the shipper you ask. As we said at the top, everyone was burned but at different severities.
The shippers who are caked in Neosporin ointment from all of their burns are not letting bygones be bygones with past woes.
A tidal wave of shipper complaints directed at carriers has swamped the Federal Maritime Commission (FMC).
The brunt of the complaints has to do with carriers failing to provide contracted space on vessels and forcing shippers (under contract!) to pay higher rates on the spot market instead. If not, the cargo would be rolled.
At its worst, some shippers have even said they paid spot rates for space on the very same ship they contracted.
That’s like a gym member running on a treadmill at Planet Fitness, only for an employee to kick them off that same treadmill and say run on another one. Also, they’re paying twice as much to work out that day.
This doesn’t look good on the part of carriers. These grueling anecdotes from shippers suggest carriers were deliberately backing out of their contracted arrangements to favor profit.
At this time, we aren’t officially accusing them of this. We’ll have to see what formal investigations uncover. That said, however, this certainly calls into question the practices carriers conduct with their services and, when given the upper hand, how they wield their power.
Shippers are eyeing future risk, not best-bargain revenge
So, why haven’t shippers tried to “get back” at the carriers now that they control the buyer-seller dance? Couldn’t they haggle the desperate shipping lines to the lowest buck?
Cue one of our insights from February–the cautiously optimistic shipper.
While shippers should feel empowered with a degree of buying power over carriers, driving the best bargain they can get when negotiating a contract may not be the best approach.
Surely, it’d be cathartic after a rough two years, but shippers have shown to be more calculated than that. Many have identified future risk, an awareness of how fickle the industry can be. Consider this a Covid legacy.
These future risks could mean a lot of things, but what most shippers anticipate are carriers locking up contracted space down the road for when demand picks up again.
As a result, a popular strategy this contract season has been flexibility.
Contracts are still being inked, but for less volumes and with multiple carriers or forwarders. In return, shippers are designating their remaining freight to the spot, or open, market. With some even going as far as committing half their freight to floating market conditions down the road.
We are now nearing June and the market has stayed relatively soft. Are shippers overreacting? Are they being too weary?
Of course, not. The first half of the year is on the homestretch of being muted and uneventful, but these proactive decisions from shippers are certainly worth any extra time or costs they invested.
The reality is we likely won’t see a Covid-era freight surge that persuaded carriers to lock out contracted space, but it’s happened before.
If there’s precedent, even for the crazy, best believe there’s a chance it could happen again. Even if it’s at weaker intensity, the same issues could emerge for shippers.
And, now for our next section, we’ll talk about the benefits of purchasing asteroid insurance for your home.
Jokes aside, adding assurances to the tab, whether on the open or contracted market, is a strategy we strongly recommend. Want to discuss this with one of our experts? Contact us!
Q&A: "What are blank sailings?"
Answer: A blank sailing is essentially when a sailing has been canceled by the carrier.
Say for example, you’re lined up for a weekly schedule departing from Shanghai and arriving in Long Beach, once a week.
You book it and your shipments are supposed to be on that ship.
However, all of the sudden, the carrier says, “Nope. We’re not going to sail the freight. Rather, the vessel is going to depart completely empty.
Tah dah! You experienced a blank sailing. Your valuable cargo is now bumped to the next sailing.
Ask our experts any pressing question you have in international shipping. No need to worry! All submissions are anonymous and, who knows, someone else may have the same question as you.
Insight: Movie Theater Launches its Own Candy Amid Shortages
Movie theater AMC is launching its own candy line in an effort to offset price hikes from manufacturers – something AMC realized was a result of the pandemic and the supply chain shortages that took place.
Some of the theater’s candy manufacturers have increased their prices (some of which got bumped to as high as 33 percent) prompting AMC to create its own private label candy. The theater plans to sell it at a lower price than current name brands that AMC also offers.
For avid name-brand candy lovers, no need to fret! AMC still plans to carry these name-brand candies.
This candy line is expected in AMC theaters later this year or early next year.
One question to ponder. Will more companies do something similar like this too?
Interested in more about this year’s contract season and how shipper strategies have changed? Watch our latest webinar below where Interlog’s experts sat down and discussed these topics.
Week 2 - Originally released May 12
Insight: Ports Continue to Value Terminal Expansions
This investment will be going towards doubling the port’s annual capacity, allowing the East Coast hub to handle nine million TEUs a year.
Additionally, the Georgia Ports Authority continues to push to open the Ocean Terminal with an expanded berth, in less than two years.
This terminal is expected to expand to 2,800 feet which will be able to handle two 14,000 TEU ships at the same time. And then they plan to expand even further, after 2025, so the terminal can handle two 16,000 TEU ships at the same time.
The port also has plans for an additional $204 million that will go towards the creation of a long-term storage yard at Garden City.
While this won’t bring in berth capacity, it will allow shippers to reduce their demurrage exposure. With storage fees at this storage yard being cheaper than at the terminal.
They expect this site to store around 20,000 more containers when it opens later this year.
Vancouver Fraser Port Authority has plans for a ‘massive’ terminal expansion.
After clearing a ‘major environmental hurdle’ the Vancouver Port Authority plans to choose a contractor (within the next two years), to construct the landfill portion of the Roberts Bank Terminal 2 (RBT2).
The port says RBT2 will be able to handle 2.4 million TEUs and will double the port’s throughput capacity by nearly 50 percent.
Several years later, the Port Authority will begin the process of selecting a terminal operator, who will build and operate the facility. Expected completion is projected to happen between 2030 and 2032.
Insight: Alcohol and Toys: How These Two Disparate Commodities Have Fared
Alcohol and toys. Two commodities that’ve probably never been in the same sentence until now.
Seriously, if you drew a Venn diagram for the two, you’d end up in a different room. The only plausible connection would be drunk adults may act like five-year-olds and five-year-olds like toys, but that’s about it.
However, in the world of international shipping, alcohol and toy imports both experienced crazy rides throughout the pandemic.
Toys are feeling a hangover
Import volumes for toys were breaking records in the last two years. While the same could be said from all walks of commerce, toys have been an especially interesting commodity to track as they emphasize the tremendous highs of 2021 and 2022 while also the terrible lows of 2023.
Ironically, it looks like toys are the hungover one of these two.
On one hand, the sector brought in so many toys that even Santa’s workshop wouldn’t have kept up with the demand. In 2022 alone, 1.26 million TEUs of toys (and games) entered the U.S.
But, on the other, changing and unusual buying patterns from consumers, particularly towards the latter end of last year, has now put toys in a similar situation as other retailers find themselves in—bloated inventories.
In fact, toy executives don’t expect demand to normalize until the fourth quarter of 2023. The question remains though on how buying patterns around this time will look.
Most are anticipating a more normalized performance for the rest of the year punctuated by a traditional peak season. What do you think?
Alcohol is sobering up from supply chain bottlenecks
Booze saw a relatively strong 2021 and 2022 as well while observing changing consumption patterns thanks to the pandemic.
With the temporary closures of restaurants and bars, consumers had no other choice than to drink at home.
While it was a change in consumer behavior alcohol had to adjust to, demand for it seems reliable and stable. The big issue for booze has been the COVID-related curveballs thrown at it the last couple of years.
Notably, this includes in the second half of 2020 when carriers began extracting capacity out of the transatlantic (popular trade lane for alcohol imports) and placing more ships in the transpacific market.
And, unlike toys, certain alcohol products, like wine and beer, are perishable in nature. Tightened capacity on reefer containers and tiple-digit day transits decimated importers.
Fortunately, a lot of the chaos has settled since then allowing a return to stable operations to meet stable demand.
Week 1 – Originally released May 5
Insight: Transpacific GRIs Pressure Service Contracts
When the Ocean Shipping Reform Act (OSRA-22) passed in 2022, it stated that the FMC must address the billing of detention and demurrage fees within one year. That deadline is fast approaching.
The FMC has two months (until June) to issue its ruling on this issue. The issue being how ocean carriers and marine terminals assess fees to importers for containers that dwell at port yards beyond contractual free time.
With the rule looming, several container lines (HMM, Maersk, etc.) have announced they have stopped charging importers or consignees, demurrages fees on days when terminals are closed.
However, uncertainty remains because from the perspective of marine terminal operators, storage fees will accumulate whether or not a terminal’s gates are open to truckers or not.
Insight: Decreases in Container Volumes Lead to Slowdown in Activity for East Coast Drayage
Drayage drivers that flock to one of the busiest ports in the U.S. – port of New York and New Jersey – have started to see a slowdown in activity, due to a decrease in container volumes, after a red hot past couple of years.
So far this year through March, imports remain down 27 percent at the port of NY/NJ from the same period a year prior.
Additionally, truck visits at the port have also dropped due to the decrease in volumes. The first quarter saw weekly truck visits an average thirteen percent below the same period a year ago.
These volume decreases have allowed drayage driver load ‘preference’ to diminish a bit.
Read more here.
Before Memorial Day Weekend, our team at Interlog embarked on a company outing to Top Golf for some quality bonding and friendly competition. Watch as some of our employees share what their favorite summer activity is!
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